The man seen by many as the driving force behind modern Malaysia, Prime Minister Mahathir Mohamad, is to step down late next year.

A statement by the ruling party on Tuesday confirmed that Dr Mahathir, Asia's longest-serving elected leader, would be replaced by his deputy, Abdullah Ahmad Badawi.

If there were any speculations of a jostle for power, it didn't take place

Abdullah Ahmad Badawi

Party secretary-general Khalil Yacob said Dr Mahathir would step down after he hosts the summit meeting of the Organisation of the Islamic Conference (OIC) in Malaysia in October 2003.

Dr Mahathir, 76, shocked the nation when he made a tearful resignation announcement at the weekend, although Deputy Prime Minister Badawi later said that Dr Mahathir had agreed to stay on.

Mr Khalil, who read the statement flanked by Mr Badawi and other party leaders, said that Dr Mahathir would also take two months of leave ahead of his resignation in order to hand over to his deputy.

'No power struggle'

Mr Badawi may remain under Dr Mahathir's shadow

The secretary-general of the ruling United Malays National Organisation (Umno) said that although there was no exact date for Dr Mahathir's departure, it will be after the OIC meeting, which is from 24th-25th October.

Mr Badawi told a news conference: "Throughout the time-frame there will be a smooth transition of power but for now he is still the prime minister.

"If there were any speculations of a jostle for power, it didn't take place."

Umno leaders lined up at the news conference following the announcement to swear allegiance to Dr Mahathir and the succession plan.

"Millions of Malaysians have lost an extraordinary leader," said Umno Vice President Muhammad Muhammad Taib.

"Even in 100 years, or even 1,000 years, it would be difficult to find another like him."

A BBC correspondent in the region says the proposal that Dr Mahathir temporarily remains as leader will lessen the impact of his departure.

The party statement said that Dr Mahathir would retain the financial portfolio over the next year, which may comfort investors. The political uncertainty has sent the country's stock markets lower.

Mixed record

Dr Mahathir has overseen Malaysia's transformation into one of Asia's richest countries.

But despite the country's economic performance, his political record is more controversial.

The jailing of his former Deputy Prime Minister Anwar Ibrahim in 1998 on charges of corruption and sodomy strained Dr Mahathir's relations with the West.

Mr Anwar has argued that the charges were politically motivated as he posed a threat to Dr Mahathir's rule.

The Malaysian leader has also been accused of exploiting repressive internal security laws to stifle dissent.

But US President George W Bush has recently congratulated Dr Mahathir's action against alleged Islamic terrorists as part of the US-led war against terror.